M32631 International Human Resource Management

M32631:International Human Resource Management

Box A:

2.Analyse and Explain the changing role of corporate human resource function in International firms.

The wave of internationalisation drive from the fast movers in MNC (multi national corporations) saw a boom in expanding their territories with products and services globally. This necessitated the need for HRM to match up to the global business aims and goals. To align the international business strategies the effective management needed the support of international HRM. IHRM is a set of activities, functions or processes aimed to attract, develop and maintain the growth of MNC. Schermerhorn and Osborn (2011) added that the role of IHRM thus became more strategic where corporate strategy and human resource strategy, operations management required alignment. For the manufacturing firms across different locations geographically, the challenge was of coordination, shared learning, standardisation of HR process and ability to adapt to the local, national and international level.

There has been a transition in style of functioning as in initial days the HRM as well lacked strategic viewpoint in PM & IR. Nkomo et al. (2010) explained that the HR department role in that context became more wider in the context as HR mostly focussed on the people and process to meet the future exigencies of operational dimensions. It was seen that HR department used coercive, normative pressures to transfer HR practices. Over the years, strategic functions, tactical functions, change function with administration with operational employees championing international assignments was seen. The trade union in the context of multicultural environment and labour laws pertaining to that native country was being leveraged against the profit made in internationalisation. Albrecht (2010) opined that the challenges are more intricate as HR function become more ethnocentric/global and polycentric or multidomestic and later on went to become geocentric or transnational in nature. Most of the IHRM strategies are seen to be adaptive in the first phase and having acquired the expertise and mastered become exportive only to be replicated quickly to other countries. The later part of the HRM at international level was found to integrate those as most of the business operations across geographic locations were dependent on each other due to product type, and customers/markets served. Bjorkman and Stahl (2010) noticed that this dependent context of IHRM roles and level of operation totally dependent on the employees who build up steady competencies and learning curve in order to continue the growth momentum. This brings us to the argument, as to why some countries are successful that points to country of origin and cultural diversity issues. Businesses driven by values and mission and vision are more congruent in the operations and management functions which shows that HRM function is adapting to the local country labour laws. The visible actions in the form of HRM practices is conducive to those prevailing culture and practices in that country which shows how IHRM is increasing in scope to accommodate and conform to compliances (Albrecht, 2010). The effective management was possible through HRM being adaptive to create success outside national borders.

The drivers of change in the IHRM domain are essentially seen as an extension of  the classical theories of economics that fuels business in other continents for revenue generation. Bjorkman, and Stahl (2010) added that there is increasing learning experiences, shedding of colonial mentality and overemphasis of cross cultural training. Most of the change  has been affected due to the global economy, labour laws, trade union, exchange rate which guided the emerging IHRM to adhere to the local compliance issues (Schermerhorn and Osborn, 2011). However, it has been noticed that in international perspective the knowledge about native country and investments are huge and it is the key facilitator for the success. So knowledge as a facilitator to external and internal alignments in international context, knowledge as a relationship builder and enhance social capital across value chain (Armstrong, 2012). IHRM also adopted flexibility and adaptability to local laws, tolerance on native culture and showed increased capacity to learn. Some of the strategies that MNCs showed are the ability to cope with the business challenges and meet the corporate strategy linking operations with human resources. So the existing system get replicated standardised within the same company in different locations that creates cross border equity, alignment of HR practices from HQ to adapt to the local labour market (Richard and Johnson, 2008). There are obvious reasons of conflict, that may occur due to differences in HR practices between the parent HQ and subsidiary in other country, but most of it how it is handled as per law of the land is a strategic choice. Major strategies from transnational firms show that internal consistency in HR practices is a default need in order to meet the local country market responsiveness factor (Katz and Elsea, 2007). Changes in labour practices in that country for that same firm is different where the issue of management control over resources, like finance, local talent and the productivity part are seen more in the integrative approach trends. Though there are three patterns which are noted here as the business processes within teams, projects and wider web of stakeholders causing centralisation of activities, decentralisation and coordination (Katz and Elsea, 2007). So the role of IHRM in balancing activities as per requirements in each of glocal centres shows how multidivisional firms are increasing decentralisation as a core to achieve operational efficiency, tap cheap labour. Centralisation in wages, policy formation, financial matters, senior management norms in international operations is also seen. This also required higher level of coordination where distance that was a issue is now resolved through the use of internet, ERP, VoIP (Armstrong, 2012). IT is therefore a facilitator and made HRM in international context more closer to achieve the corporate strategy. The intensity and pace of internationalisation also affected the HRM as dealing with public and private in cross cultural context led to misunderstanding of behavioural issues, that made HRM and psychology of body gestures and languages more important. The success of the venture in an international context is being seen as more of the top or senior management ability in handling challenges, that decided the failure or success (Richard and Johnson, 2008). The closely knitted committed top management heading global projects and delivery systems followed centralised knowledge repository that helped to spell success in the competitive market. HRM therefore extended the politically powerful arm to manage SBUs, subsidiaries to mobilise and operationalise the systems. The HRM in this context showed more of builder role that kept on piling up new norms and roles in order to drive the momentum in different country. The change needed for internal HR systems to align at tactical and strategic level took time to adjust in external environment (Truss, 2006). It added onto the knowledge bank, level of expertise, while trying to integrate global functions and bring in responsiveness in HRM system. Roping in stakeholders at global level is a business requirement, hence mechanisms emerged to create region or country specific hubs or centres (Powell, 2007). This normally amalgamated culture, technology, local knowledge, to boost growth of firm and its verticals in that country. So sharing of knowledge, exchange of information at local level intensified which is a separate entity of HR as scale of operations increased. Youndt and Lepak (2007) argued that most of this is more contextual approach, where emphasis to consolidate region based norms, rules, compliances in HRM are met and followed by SBU centre in that country. At the operational side, HRM had to deal with projects of global scale where the success dependent on identifying competent employees able to meet deadlines and work in HPWS (high performance work system). Project teams at international assignment are more self managed, where training is modules through e-learning and shared as each member is highly motivated to show leadership. Most of IHRM practices showed overdependence on communication systems flowing through the HRIS, to be high performing showing exemplary leadership to deal with consequence (Phillips, 2012).

This is a very striking difference notices as focussing on outcomes has made HRM vertical to be wary of tactical and strategic moves in global context. So the role of HRM and its managers is more about a shift in not training imparted in hours but more of skills or competencies learnt and delegated. In the perspective of job design, and designing organisational hierarchy, changes are seen that is specific to that country. So a flat organisational structure or a tall one, fused together in a new location required substantial efforts, while employees selection on competencies mattered as their readiness to work within cultural diversity was looked into. Challenges in IHRM in terms of foreign exchange, tax and designing compensation structure was immense until integrated ERP softwares like SAP integrated all key elements of HRM accessible across locations (Phillips, 2012). So in every stage IHRM role proved to be immense in equipping the human capital and managing them even if it is not a part of the organisation in different location. The HR focus became more technical and result oriented in terms of KRAs which is linked to corporate strategies. IHRM focused on employee communication, problem solving at accelerated pace in order to tide over the situation. So though it wanted to advocate human capital steward, the role of facilitator of IHRM surpassed that of relationship builder in order to become rapid deployment specialist (Schermerhorn and Osborn, 2011). This can be correlated with the earlier discussed adaptive, exportive and integrative roles which IHRM. To evaluate the change of the HRM strategies followed over the recent years, it was seen that legal labour office had a profound impact on the policy formulation in that country and best practices only emerged when operationally successful status stayed with the firm (Zahra and Garvis, 2007).

The transformation of HRM in the corporate environment thus has evolved with the needs and situations guiding it. Most of the HRM strategies is an amalgamation of different situations and some of them are existing norms and strategies. Developing a systematic framework of HRM at global level takes months and years and with the boon of the IT and internet much of it is now visible, quantifiable and accessible across locations (Schermerhorn and Osborn, 2011). Change in HRM when compared to the traditional firm with PM&IR can be marked as evolutionary and newer OD (organisational development) initiatives that takes other functions into consideration makes it holistic (Jessuf, 2008). Stability of existing HRM through HRIS has helped a lot of organisations in designing the key tasks of HRM. Typically summarising, the HRM functions have evolved over the bureaucratic culture and management with modern management principles guiding the efficiency and productivity of the business (Ichniowski and Shaw, 2008). HRM into IHRM has been adaptive and policy alternatives, by checking the internal alignment of functions, viability and internal-external fit show the new models to emerge. Practice processes and techniques have embraced change in HRM faster in order to equip and support other functions at international level (Reddy, 2010). Quality of input in the IHRM is now dependent on key skills and knowledge that is an organisational knowledge asset which is destined to deliver certain specified outputs at global level is a major driver of value addition to existing HR process (Delery, 2006). This transformation into internationalisation of firms after opening up of economies in the last decade of the last century thus have ushered new approaches to be looked into HRM policies. Harter et al. (2006) stated that the redesigning of HRM process and motivating employees to face the HRM reform is cleverly tied to the business goals while systems, structures, policies helped to meet the corporate goals. This changed over time and transformational MNCs also applied it to the PLC curve in order to scale up for expansion and growth. The centralised top management decision making at the parent HQ and its roll out in distant locations showed the asserted agenda of leadership commitment to vision and goal of MNCs (Boudreau, 2009). Most of the successful change showed over-reliance of HRM as its key to adapt fast to newer systems, practices, procedures by existing employees. Schuler (2010) concluded that therefore creating new HR systems and adapting the old HR systems as per global business context is not a fixed model but more of need based adaptive one.

 

 

MODULE CODE: M32631:International Human Resource Management Box B:

With regard to recruitment and selection, actual practice in MNCs seems to be quite different from recommendations for good practice.  Why do you think this is the case, you should discuss this with reference to key literature?

The definition of recruitment, states that it is a searching mechanism for candidates looking for jobs in order to make the organisation succeed (Terpstra and Rozell, 2007). Terpstra and Rozell (2007) added that the selection process which is the next step entails gathering of the information to evaluate which candidate is fit for the vacancy. This is a key and first step for any HRM function in order to equip a firm. The MNCs are structurally and functionally much different than that of the traditional model of business in any nation. Arthur (2012) explained that  in the context of international recruitment process, the key elements if the recruitment and selection process needs to be conducted in home turf, for host country or third country as there are different issues that are linked to that. Linking of staffing plans with the MNCs expanding in a location, the approach to staffing, managing the expatriates including females, lifecycle of the MNC firm needs to be addressed first.

One of the best theories that underpin best practices in recruitment and selection is the competency based human resources model. Hiring objective based candidates whose competencies and skills match the job profile, organisational gaols and values is the key rationale behind this theory.  Recruitment of wrong candidates results in increased costs in the form of low productivity, idle time, training costs, higher recruitment fees, higher staff turnover, and provision for redundancy packages (Dyer and Reeves, 2007). However, most of the MNC’s do not follow the competency based model of recruitment & selection wherein they fail to screen the candidates’ potential in terms of their existing skill sets, behaviour and competencies through evaluation such as  psychometric tests (Doty, 2008).

 

Best practice recruitment & selection also stress on identifying the different hiring sources through meta-analysis of their effectiveness. These can be fundamentally assessed by analysing the job performance and turnover rate. In this context, Koch and McGrath (2008) identifies referrals by existing staff members, in-house recruitment, and re-recruitment of former employees, followed by walk-ins as the most effectual sources. Referrals by existing employees is identified to be the most suitable recruitment source in terms of cost control, however, it is likely that it may not lead to hiring a diversified talent pool, as in online recruitment. As compared to traditional recruitment such as advertisement on print media, walk-ins, availing services of recruitment agencies, online recruitment has a wider geographical reach in terms of attracting individuals from international destinations (Delery, 2006). This also helps to comply with regulations relating to equal opportunities in recruitment & selection process while helping organisations to have a diverse talent pool that fit into an MNC culture.

Recommendations for best practice recruitment direct organisations towards web based recruitment practices in order to hire a diverse talent from different arenas.  As compared to recruitment through newspaper advertisements, the cost involved in online recruitment is substantially lesser, it speeds up the overall recruitment process, helps in easily dealing with huge volume of job applications, while reaching a wider pool of talent (CIPD, 2005).

Though there are industry vertical based best practices (aviation, courier & logistics, software, exports) that are typically followed when firms are transforming to become multinationals, the issue of region centric, poly centric, ethno centric are always kept in mind. This reflects in the approach the MNCs have adopted in order to sustain the business. Typically to safeguard the business interests and corporate strategy on track, the MNCs are engaging into more control and coordination in order to minimise the risk in distant countries (Schmitt and Sadowski, 2008). Though the language and cultural barriers are commonest hurdles the experienced managers in MNCs want to avoid the issues of hiring costs in the countries is something they will always want to curtail. The legal manager working with HR manager in that country also looks out for ways to eliminate work permit, visa problem, deal with trade unions(Katz and Elsea, 2007).  MNCs follow the Ihram’s approach to find the right mix of manager and employees in recruitment and selection process. Most of the managers fail the personality trait theories of leadership and have been known to show more creativity, commitment, work with cross functional teams and self motivated (Huselid, 2008). The responsibility is huge and cost of failure being an expatriate is also tied to loosing corporate goals or business relationship in a country (Harel and Tzafrir, 2008). They move from ethno towards poly centric where financials are kept with parent HQ, while more local knowledge, autonomy, practices are adopted that are more circumstantial in nature. So the systems approach and structured HRM recruitment and selection procedures are not followed strictly (Schmitt, 2012). This is done mainly to minimise the cost involved and adapt to local practices which deviates from the normal HR practices that is being followed in their own parent HQ.

Scullion and Starkey (2008) addressed that the major recruitment activities which the MNCs resort to is position filling, management development and OD that ranges from short term (few months), extended (stretched to a year), and long term ( more than two years). So mostly contractual and performance being evaluated of the employees, measured in terms of KRAs. Shen (2009) added that in a broader context, the MNCs are wary about the political and legal factors affecting business and HR function in that country though it hard-sells its brand name and image to new recruited employees. Some of the key skills the Japanese and EU MNCs emphasize is on the technical competence and the ability of the employee to acclimate. This is a very different from the North American MNCs where they understand that previous experience abroad does not guarantee success. So the elements while they recruit and select shows how well the managers of the parent firm an aspirant MNC is trying to put in relational skills to be able to connect in order to select the right candidate for the right position. This is critical as global positions offer more challenge and higher level domain knowledge and technical expertise. Some of the most common methods the MNCs are the resume and competency profiling followed by the psychological testing. The interview process is highly structured which happens in several rounds till the manager in charge is assured of the capabilities of the candidate in the global location. The challenge here is that most MNCs in order to understand the newly appointed capabilities are trying to seek those values and norms that are prevalent in their firm (Suutari and Tornikoski, 2008). While the more recent norm is that of delineation of parent HQ from the international subsidiary in a distant location where the ‘global manager’ and competencies are mapped to handle country specific assignments are followed by MNCs. So work experience relevance is matched and if not then, the ability of the candidate who is a prospective is evaluated with situational cases. Treven (2006)  opined that the candidate’s ability to respond and adapt to multicultural environment (language, ethics, norms and culture) are key guiding behaviour that are sought after by these MNCs. New age startup firms emphasize on this and stress as most of the business prospecting and sales is dependent on this issue (Arthur, 2012). The idea is to test the skills and their ability to adapt and adjust with the host country nationals, while the recruitment process tries to predict the speed of adjustment of the candidate (MacMillan, 2008) (Krishna and Monappa, 2008). This key skill of the manager reflects the ability to define their position as an expatriate and report to the HQ parent firm in terms of job competence, relational abilities, fight with environment factors and exhibit technical knowledge and competency (Phillips, 2012) (Nkomo et al. 2010).

The recruitment process in MNCs tries to seek the adaptability speed and networking skill ability that is the key to the business success in host nation (Schuler and Jackson, 2005). In the current globalised business scenario, the emergence of RPO (recruitment process outsourcing) has also stimulated organisations to outsource their recruitment activities to overseas destinations, mainly developing countries to eliminate costs (Snell and Wright, 2005). However, considering the cultural disparity between countries, particularly the developed economies versus the developing ones, such practices are often considered risky by MNC’s. Armstrong (2012) added that there are evidences of MNCs shifting to a hybrid model where there are changing to a newer design of recruitment and selection practices. Dowling et al. (2008) added that this IHRM model varies as per location and country, also in terms of complexity and degree of difficulty to attract talent. The aim though remains same to seek the right human capital with apt set of competencies. So differing in recruitment channels, it avoids the formal routes, and starts exploring market, first point of contact, and tries to understand the local labour market. ICT has been seen to be used widely in this context when the external environment familiarity is low (Dickmann, 2009). Encouraging direct applications in their own websites, relying on local recruitment agencies and referrals are seen. Briscoe et al. (2008) added that culture being a factor, the selection of the candidate, consists of expert(s) of the industry vertical of that native country. This otherwise is not permitted in parent HQ, as the expert may not be part of payroll but an important stakeholder. Brewster and Harris (2009) argued that the issue is not about fair selection but also to justify the procedural justice as selecting of a candidate and the output is directly visible. Local advertisements for top positions are advertised in newspaper who is in charge of mass recruitment in that region and accountable for that. This needs to be stressed that MNCs systematically monitor the recruitment and selection outcomes regularly, as most of it is tied to the key person who heads the establishment process including ramping of head count. To reduce dependency and cope with the situational demands, MNCs adopt flexibility and exercise to reduce pressure of workload against time (Albrecht, 2010). So online application process, filtering of resumes, telephonic interview, video interviews in local country are seen commonly to speed up the HRM activities since everything is project deadline based. Wright (2006) supported the fact that they are also wary about the cost issue which is directly affecting the initial investment in that country. Then the local adaption of the culture, that allows both genders to enter the mainstream workforce, the age limits (upper and lower) are also looked at. The educational qualifications in MNCs are prerequisite to qualify, but the selection depends on the competencies delivered in previous experience that is tested in interview and on the job training. In case of third country nationals forming a major part of the force, the issue of cultural sensitivity are outlined as a HR norm to respect that stabilises the workforce behaviour to eliminate historical race, religion based hostilities against each other (Bjorkman and Stahl, 2010). This strategy set outright is exemplary and very different that its parent HQ may be following. The trend of sub-contracting to avoid the laws and the consequences in that country is smartly dealt by MNCs which is not a norm in its parent HQ. Wright and Dyer (2005) argued that the size of business, volume of operations, local employee conditions, country based labour laws, compensation package, growth rate, cultural and legal conditions, cost of recruitment is what MNCs typically look at to be in control.

They shun the best practices in their vertical and adapt to the market conditions in that country that is directly related to the financial budget to set up the first establishment cost. The approval of the activities though headed by the project head of that SBU, is accountable shows that every HRM activity is cost based approach that is also challenged by time, culture and adaptability factors before operations begin. The adaptability factor is tied to accountability of the expatriate position and KPIs makes HRM practices very dynamic when compared to traditional models at home country. The strategies of HRM in recruitment are more tactical rather than strategic, since business requirements force the managers in charge to find out the most amicable solution within the work practices constraints.

MODULE CODE: M32631:International Human Resource Management

 

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